November Industrial Production

Recovery from temporary lull begins

RSS

December 28, 2015

  • Shunsuke Kobayashi

Summary

◆The November 2015 indices of industrial production was down by -1.0% m/m, its first decline in three months, while falling slightly below market consensus (0.5%). The shipment index was down considerably by -2.5% m/m; negative results were recorded for all headliners. Inventories were up slightly by +0.5%, with inventory ratio up for the first time in three months at +2.9% m/m. However, the METI forecast sees an increase in production in the future, suggesting that Japan’s economy will leave behind the recent temporary lull and begin heading toward recovery.


◆Production is expected to return to a growth trend in the future. First, in the area of domestic demand, recovery is expected for consumption, reflecting the improvement in real income for both working households and pensioners. Meanwhile, corporations have not lost their willingness to invest in domestic capex, and this should provide underlying support for demand in the area of capital goods. Overseas demand is also expected to return to a recovery trend, despite a mixture of both strong and weak points. In the US, economic growth continues with a strong undertone especially in the household sector. Exports to the US are expected to move into a growth phase centering on durable goods. In the Eurozone, the trend toward recovery is expected to continue, supported by cheap crude oil and the ECB’s quantitative easing. As for the Asian economy, China’s ratio of cash reserves to deposits has been lowered along with its interest rates, and there are signs that the real economy has hit bottom. It is very possible that further declines in demand can be avoided, centering on consumer goods.

Daiwa Institute of Research Ltd. reserves all copyrights of this content.
Copyright permission of Daiwa Institute of Research Ltd. is required in case of any reprint, translation, adaptation or abridgment under the copyright law. It is illegal to reprint, translate, adapt, or abridge this material without the permission of Daiwa Institute of Research Ltd., and to quote this material represents a failure to abide by this act. Legal action may be taken for any copyright infringements. The organization name and title of the author described above are as of today.